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Scripps Ranch Housing Market Snapshot


American Home Buying Day revisited

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Steve penned this little gem about five years ago, shortly after Jim Cramer called the bottom of the housing market. 2007, 2012. Tomato, tomahto. Close enough, if you ask me.

The point is that, lately, we have been feeling like American Home Buying Day is finally here. Now all we need are some homes to show the buyers.

nhbd.jpg

The Declaration of Independence 

If we had a dollar for every time… How many times have we said that? At the risk of compromising our street cred, this latest one is for real. Well, actually, it's not the latest, as we have been hearing it for about twelve months running. We hear it when we are holding an open house, at the grocery store, at a school function and even at the gas station. We hear it from the prospective buyers. After asking us, "How long has it been on the market?", "Why are they moving?", and "Is there going to be a price reduction soon?", we inevitably hear the next declaration.

"I think I'll just wait SIX MONTHS."

A thoughtful explanation invariably ensues. "My (dentist, Uncle Phil, barber, therapist, insurance guy, mailman) says that in SIX MONTHS it will be the right time to buy." Of course, these experts have it all over Jim Cramer from CNBC who, as our alert reader "Rido" pointed out, identified next March as the bottom of the market and, therefore, "the time" to buy homes again. The Federal Reserve Board, most economists, and even the National Association of Realtors have yet different opinions, but what do they know? Naturally, the smart money is on Uncle Phil.

Six months, six months, six months… There are so many people waiting to make a home purchase, and all of these people seem to be zeroing in on a single day 182 1/2 days from now. You heard it here first: All hell is going to break loose.

The one thing we most need in this current market is certainty. Thankfully, we seem to have a quorum and a consensus. All seem to agree that the optimum buying time-frame is six months. The only remaining question is, "Six months from when?"  

We the People

Somebody has to take a leadership role. So, we are here to bring sanity to the table. A moving target causes angst, it causes frustration and it results in undue stress and premature graying. Wishy-washy targets benefit no one. We need to establish the exact day on when it will be okay for the ever-growing gridlock of buyers to safely venture from the sidelines.

Therefore, let it be known that, in order to create a more perfect union, the time begins now. Six months from today is May 15, 2008. If the barber, the dentist, Uncle Phil, and other studied pundits in our collective spheres of influence are all correct, do you have any idea what will happen on this date? It will be chaos.

Society Without Government

The latent demand is just too enormous, and anarchy can get ugly. Remember the debut season of Tickle Me Elmo? Imagine, then, a day when throngs of home-seeking buyers take to the streets finally ready to call dibs on their favorite home (you know the one – "model-perfect", "priced to sell" , "bring all offers", "koi pond conveys"). And, then, they will proceed to beat the crap out of each other with their respective Zestimates. In order to avoid this impending doomsday scenario, we need to bring not just certaintly but order to the process.

Hail to the Chief

That's why we propose May 15 as our newest National Holiday, "American Home Buying Day". This way, we can all count on it and plan accordingly. Government agencies can coordinate traffic control and emergency personnel. Costs to the taxpayers can be offset by selling strategic advertising, such as "593 Shady Sunset Happy Place Lane brought to you by Jim's Discount Tire and Mortgage." Real estate agents will have lotteries to determine in which order their clients will get to see each home. "Number three-zero-six: Please report to "Lovingly Maintained 4BR Plus Bonus Room, Owner May Carry." Thinking about it, this is so much better than the arbitrary way we do business now, just showing multiple and random homes, willy-nilly, over the course of months and months. Now, the conversation will be much different. Buyer: "Can we see the home this weekend?" Agent: "No, you'll have to wait until American Home Buying Day. Take a number."

America was made great by increasing efficiency which led to enhanced productivity. Eliminating all but one day a year to buy a home will do the same thing. It's the six-month solution. We will fly our flag proudly, in the colors of Sienna Sand and Arizona White.

What a great country!

Give us your listings and no one gets hurt.

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I remember an old joke from years ago, although I have probably butchered it over time as the old brain cells have moved well beyond their half-lives. It's a joke about picking your argument.

A man faces his accuser in court, the victim of an attack by a big, black dog. “It couldn’t have been my dog, because I don’t have a dog. Besides, my dog doesn’t bite. And he’s white.”

Just give us the damn listings, already, and no one gets hurt.

As reported by Inman News, that’s the appeal that Zillow sent this week to Multiple Listing Services (MLS’s) across the country.

Back in May, I wrote about the real elephant in the listing syndication room – content. So this appeal by Zillow for free content comes as no surprise. Except for the part about having the huevos to lay their cards out in such a matter-of-fact, cut-to-the-chase manner.

Just give us the listings, already.

Maybe the whole coercion angle wasn’t working quite as well or as swiftly as they had hoped. Just last month, the former friends-of-the-agent I applauded in those more innocent, salad days, were insisting they didn’t have a dog in this fight. “The home buying and selling public demands that your listings be gift wrapped and shipped directly to Zillow. You owe it to your clients. Do it for the People!”

Except it’s not about the People at all. It is about the “agent wallet,” that big pot of gold that catapulted the company into IPO stardom. It’s about shareholders, profitability, and future earnings.

All the fancy algorithms and questionable Zestimates and whimsical blogs about celebrity houses in the world will not keep the agent wallet in the house without the listings. Because, it is the listings that buyers and sellers want to see. And it is the buyers and sellers looking for those listings that the agents are after.

Apparently, the argument du jour is that by simply going to the source — the MLS’s — Zillow’s pesky problems with data integrity can be readily solved. And so they could. My own future earnings could also be greatly enhanced if Nordstrom simply shipped me their entire fall line so that I might set up my own little marketplace on eBay. But, I am smart enough to know that they wouldn’t just send me their stuff for free. Nordstrom would probably want something in return.  It’s crazy, I know.

It’s the content, stupid. And Zillow has a bit of a mess on its hands right now. Some feeds come from brokers; others come from individual agents. Much of the listing data they do have is out of date, incorrect, misattributed or otherwise misrepresented. And, with more agents and brokers opting out of the whole thing, the data set is incomplete.

The real estate agent community is a tough one to corral. There are too many of them and, as any broker will tell you, it’s a revolving door. There is the constant need to recruit, train, rinse and repeat. Where populating a site is concerned, better to just cut out the middle man, that little guy, the agent community that you once ferociously courted in order to gain the necessary traction to publish that prospectus.

In May, I quoted my daughter, the journalist. “It’s stupid to give away your content for free.”

Indeed.

The MLS’s are the department stores of real estate. They run the showrooms that display the wares of all of the individual designers – the agents. It is stupid to give away your content for free; it is even dumber to give it away only to have to repurchase the rights to what was yours to begin with.

And I am certain that, if not the agents, the MLS’s across the country get this.

They do, right?

Hitting Bottom, Barstow, and Scripps Ranch Market Times

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According to the Wall Street Journal, the “housing bust is over.” Phew! That’s a relief.

This article ran last week so, technically, the housing bust was over on July 11. I suppose I was just too busy writing multiple counter offers to notice.

Those of us in the trenches have been seeing all of the signs of a recovery. Or maybe what we have been seeing is summer. It could go either way. But the funny thing about tops and bottoms, peaks and valleys, is that you can’t really know you are there when you are there.

Take those brave pioneers who, for whatever reason, decided it was a good idea to head across the California Mojave desert on foot. They, too, probably thought they had hit bottom when they got to Death Valley. And then they stumbled upon Barstow.

Death Valley, Barstow. Whatever. It’s close enough. I actually tend to agree that, while we may be trudging through the tumbleweed for a while yet, we’re pretty much there.

Our most recent listings have all gone with multiple offers. Last week, I entered a listing in our MLS at 6:00 am. At 5:00 that evening, I got a call from an agent. “How may offers do you have?” she asked. My answer: Five.

Which brings us to this installment of Stats Man.

Today Stats Man looks at market times and, since we long ago established that Stats Man is lazy, it will come as no surprise that this information is for the Scripps Ranch, 92131 Zip code. (Disclaimer: Information is from the Sandicor Multiple Listing Service. Information is deemed reliable but not guaranteed. Dry clean only, do not use this data while operating heavy machinery, for external use only, void where prohibited.)

I took a quick look back at detached homes sold in Scripps Ranch over the past thirty days. Note that I eliminated the short sales, because their market time continues to rack up while they are relegated to the purgatory of “contingent” status waiting for lender approval. I also eliminate the couple of homes that were new construction, builder offerings. That being said, here is what the market times looked like:

Average Days on Market: 32

Average Price per Square Foot: $268

That was fun. But what is more fun is to look at what happens when you eliminate the homes that were overpriced. How do I know which homes were overpriced? Those would be the ones that had to go through one or more price reductions before they found a taker. Duh.

Average Days on Market: 13

Average Price per Square Foot: $287

Now, as a preemptive strike for all of you naysayers, the price spectrum in each sample was roughly the same. In other words, you can’t say that more expensive homes generally have longer market times. They don’t. At least, they didn’t over the past 30 days.

In summary, what we have here is two messages. First, I will beat my favorite drum. It you price it tight to true market value — if you price it right — you will sell faster and for more. Period.  

OK. So we knew that. The other message is a reminder that there are buyers out there – a whole bunch of them. And the activity we began to see in early spring is continuing, even escalating, as we head into the dog days of summer.

Are we in Death Valley or Barstow? Beats me, but we’re close enough.

Editor's Note: The opinions expressed in this post about Barstow do not necessarily reflect the opinons of San Diego Castles Realty. It is a fine town. Really, it is. (Not to mention, it is halfway to Vegas.) They have a Bob's Big Boy. I highly recommend the Brawny Beef combo.

 

National Housing Stats and Lost in Translation

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Photo credit: By chokola

The National Association of Realtors® (NAR) released their home sales statistics for July. This data is for all property types and reflects homes sales nationally. And According to NAR, the national median existing home price was up 9.4% July over July, while the number of existing home sales was up 2.3%.

As my local news ticker (I call him “Steve”) was reporting NAR’s numbers, real time, as they were reported to him by a perky morning news anchor, I was reminded that national statistics are just that – national. They are relatively meaningless to the couple three blocks away that is trying to sell their house, and they are meaningless to the buyer in my backseat trying to pin a value on the home they just visited.

So, just for giggles, I ran the July numbers for a few San Diego I-15 Corridor Zip codes to see how we stacked up. (Information is from the Sandicor Multiple Listing Service, all property types, July 2012 versus July 2011. Data is deemed reliable but not guaranteed, blah, blah, blah.)

Zip Code Homes Sold Change Median Price Change %Detached Sales 2012 %Detached Sales 2011
92131 (Scripps Ranch) +14% +1.2% 68% 67%
92128 (Rancho Bernardo) +57% +28% 58% 48%
92127 (4S Ranch) +13% +28% 80% 73%
92126 (Mira Mesa) +15% -6% 60% 71%

You can see that the overarching, “Everything is just ducky, thanks,” message from NAR generally holds true in these San Diego communities, with Scripps Ranch most closely tracking NAR’s national numbers. But, the numbers do vary widely.

The increases in numbers of homes sold are no surprise to those of us in the trenches. We’ve had quite the summer rally. What surprised me was the magnitude of the price changes in Rancho Bernardo and 4S Ranch. But this is where you have to consider the dangers of lumping property types.

The one thing that stands out is that we are comparing apples and bananas in 92128 and 92127. A higher mix of single-family sales in these areas, of course, resulted in a higher median sale price. In Scripps Ranch, where the percentage of detached versus attached sales remained relatively unchanged, so also did the median sale price. And in Mira Mesa where attached homes represented a bigger piece of the pie in 2012, the median price dropped.

The point then, assuming you are still awake, is that broad-brush statistics are fun and great, and can give us a feel for what’s going on. But, statistics alone lack soul. In order to know how your market is doing, you can’t rely on NAR, on Case Shiller, or even on my little MLS exercise without human intervention. Housing numbers require interpretation, and only a real human being entrenched in your local real estate market can provide the context.

Which brings me to the Zestimate, Zillow’s now-infamous “estimated market value.”

Last week, Steve and I represented three clients in closed transactions. Next week, we have four more closing. And while a discussion of Zestimates slapped onto the end of a discussion of NAR’s housing data may seem only loosely tangential, this was a good time for me to compare Zestimate accuracies – before they pick up the tax recordings and the Zestimates reset to sale price. And the comparison is relevant because it underscores the dangers in relying on data without soul, without human intervention to provide context. (Yes, real estate agents are, generally speaking, human.)

For our three closings last week, Zillow hasn’t picked up the recordations yet. I should also note that two of these were our listings, and we no longer gift our listings to Zillow. Similarly, in the case of the one buyer side, that listing agent does not syndicate to them. In other words, Zillow does not reflect these homes as for sale or having been listed, but they do provide a Zestimate for each.

Address Zestimate Sale Price Difference Days on Market
10555 Arbor Park Place, 92131 $582,989 $651,000 +12% 5
7696 Andasol Street, 92126 $429,472 $457,000 +6% 4
10528 Stony Ridge Court, 92131 $627,500 $689,000 +10% 3

You can see that the reality of our market was just a little off the opinion of the Zestimate algorithim.

As for the homes closing next week, all our listings, here is what the differences will look like.

Property Zestimate Sale Price Difference Days on Market
#1 $275,884 $300,000 +9% 4
#2 $669,258 $735,000 +9% 3
#3 $908,023 $960,000 +6% 11
#4 $369,421 $352,000 -5% 5

With the exception of one little condo, the Zestimates were all significantly lower than the buyers’ opinions of value, and it is only the latter that counts. You may think that 9% sounds close enough, but $25,000 – or $65,000 – sounds like a lot of money to me. And it is a lot of money to our clients.

Finally, and as a preemptive strike to those who might claim that our selling clients are being somehow being wronged by not having their listing data outsourced to third party syndicators like Zillow, I threw in the bonus market times. And in the case of all seven homes, I should point out that there were multiple offers – on every single one.

NAR is right, at least where our San Diego market is concerned. We do seem to be turning a corner. Our shortage of inventory coupled with continuing favorable interest rates is not an insignificant factor. We’ll have to wait and see how rising interest rates, a Presidential election, a fiscal cliff, or other external factors might affect us moving forward. But if you want the real skinny as it relates to you – your neighborhood and your home – look not to national stats or a mysterious home valuation program. Talk to somebody in your hood. Your mileage may vary.

 

 

A Bold Prediction – The San Diego-Imperial County Sunrise Powerlink Project will be completed last June.

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Standard & Poors/Case-Shiller® Home Price Indices for June came out yesterday. But you didn’t have to wait until yesterday. Zillow saved you the trouble and predicted last week what Case-Shiller would report yesterday happened in June.

“But we know what happened in June!” you might refute. And I suppose that is true. Heck, I – and the National Association of Realtors® — even know what happened in July. We’re that good!

Reporting on the past is something real estate agents like to do. And in that spirit, I bring you our latest installment of Boring Stuff About Contracts. Here, I am going to make the following brave prediction:

The Sunrise Powerlink transmission line project linking San Diego and Imperial County will be completed and put into service in mid-June, 2012.

Yes, I know this is a bold statement. I might as well predict a housing bubble in 2005! Come to think of it, we should have a disclosure for that.

But here is the problem with real estate disclosures. We seem to constantly add new ones to our arsenal, yet we never can quite relinquish the old ones that are no longer needed.

Three times in the last week I have received the following “disclosure” from a cooperating agent in a transaction. Each time, they requested my client’s signature because the form is “required for their files.”

Now, I understand the spirit of this disclosure. If an agent is aware of anything that might change the decision to buy or not buy, they are obligated to disclose. Ok, fine. And since a portion of the Sunrise Powerlink will run through Scripps Ranch when it is completed (last June), a future Scripps Ranch homeowner might be interested in the specifics (specifically, will the power lines be running through my guest room when they are constructed  – last June?).

But, somebody has to go out on a limb here, so it might as well be me. THE PROJECT HAS BEEN COMPLETED! You do not need to use this form anymore. It is finished, kaput, over and done with. There was a ribbon cutting ceremony, even. If a homebuyer is to be affected by the project, they will be able to come to such a conclusion all by themselves, by looking around for the telltale signs – like transmission towers, high-voltage wires, neighbors glowing in the dark and stuff.

Oh, and while we are on the subject of disclosures that you can safely retire now (there are too many to address here), let me share with you my favorite. Please, for the love of all that is good and decent, stop sending me a separate Megan’s Law disclosure!

Megan’s law is addressed:

In the Purchase Agreement -

In the Statewide Buyer and Seller Advisory -

In the Natural Hazard Disclosure report -

We don’t need a separate disclosure. I think it is safe to say that we pretty much have this one covered.

If someone is going to sue you over Megan’s law, having disclosed it four times versus three is not going to make a difference.

Phew. I feel better.

 

 

Market Boredom, My Daughters, and the Medicare Tax (in that order)

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Question: What’s your excuse this time for not blogging for nearly a month, blogging being a medium whose success depends almost entirely on delivering consistent daily, if not weekly, fresh and compelling content?

Answer: Look! A butterfly!

OK, we’ll just call it distraction. Mixed with a little apathy borne out of sameness.

We are in the throes of a novel real estate market that lacks any of the necessary elements of a “good read” – excitement, intrigue, plot twists, a butler. What we have is a market bouncing around the bottom. It is showing signs of improvement, sure, but with no inventory to speak of, there just hasn’t been much to see here.

(For those who like stats, chew on this. We have a whopping 42 detached and 14 attached active listings in Scripps Ranch this morning – those out of approximately 8,000 and 4,000 homes standing respectively.)

Enter the distraction. My two daughters, the ones I relied on for years for my best material, have long flown the coop. And now that they are no longer resident at Chez Berg (except for the occasion trip home to visit my charge card), I have to work a little harder to keep up with their exciting lives. Stalking and creeping my way through their Facebook and Twitter and Instagram accounts takes a lot of time, let me tell you. It’s plain exhausting!

And it is easy to get distracted. While Daughter #1, the Capitol Hill Reporter, posts pictures of the Speaker of the House, Hillary Clinton, the cast of the Daily Show at the Reblican National Convention CNN Grill, and this guy….

my own photo journal looks something like this….

Meanwhile, for reasons I only later discovered, Daughter #2 who spent the summer working in custom content marketing on the NBC Studios backlot, is posting pictures like this one.

 

Apparently he’s is a famous monkey.

And as I spend time trolling the social media sites trying to find my offspring, I can’t help but notice the trending topics. I am reminded that (1) the Packers should have won Monday against Seattle and (2) we are in a political election cycle.

Which brings me to today’s topic: Affordable health care. Specifically, today’s topic is about the part of the Affordable Health Care Act involving a Medicare Tax on certain real estate transactions.

Much has admittedly been written about this. Yet Steve and I still are getting questions from neighbors, clients and at least one family member who, thanks to blast emails of misinformation warning us all to head for the nearest underground bunker, find themselves fuzzy on the specifics.

(First, the disclaimer. I am not an attorney, nor am I a CPA. Consult your tax advisor and so on and so forth because, if you find yourself being audited, “’cause Kris said so” will likely not be considered a valid defense.)

Keep in mind that I am only going to be talking about primary residences. For investment properties, it’s a bit more complicated. Having said that, here are the basic facts.

  1. Effective January 1, 2013, there will be a new 3.8% tax assessed when a property is sold.
  2. The 3.8% tax will only apply to “high income” taxpayers, defined as single filers with an Adjusted Gross Income of more than $200,000 or married couples filing jointly with an Adjusted Gross Income (AGI) of more than $250,000.
  3. The existing primary home exclusions will remain ($250,000/$500,000 for single and married filing jointly respectively). The new 3.8% tax will apply only to gains that exceed these numbers.
  4. For the squeakers, those close to the AGI limits, there is this. The tax is NOT imposed on the total AGI, nor is it imposed solely on the investment income. The tax will be determined based on the LESSER of (1) net gain (over the current exclusions) OR (2) the excess of AGI over the $200,000/$250,000 AGI thresholds.

Clear as mud? Let’s try some examples. For ease, let’s assume the taxpayer in our examples is married and filing jointly.

  • Your AGI is $5. The gain on the sale of your home is $500,000.  No 3.8% tax.
  • Your AGI is $5,000,000,000. The gain on the sale of your home is $500,000. No 3.8% tax for you.
  • Your AGI is $251,000. The gain on the sale of your home is $600,000, which is $100,000 above the $500,000 exclusion. (Note that I took lots of math in college.) You will be taxed 3.8% of $100,000 (the net gain over the $500,000 exclusion), or $3,800.
  • Your AGI is $Mitt Romney. The gain on the sale of your home is $600,000, which is $100,000 above the $500,000 exclusion. You will be taxed 3.8% of $100,000 (the net gain over the $500,000 exclusion), or $3,800. (And, may I suggest, this is the kind of problem you like to have.)

Now, here is where it gets tricky, and this applies to the folks hovering near the AGI limits.

  • Your AGI is $5. The gain on the sale of your home is $600,000, which is $100,000 above the $500,000 exclusion. The 3.8% tax will be calculated base on the lesser of the $100,000 gain OR the excess over the AGI limit. In this case, the new AGI is $5 plus $100,000, or $100,005, which is less than the $250,000 limit. Oh, happy day!  No 3.8% tax for you.
  • Your AGI is $240,000. The gain on the sale of your home is $550,000, which is $50,000 above the $500,000 exclusion. In this case, the new AGI is $240,000 plus $50,000, or $290,000, which makes the excess equal to $40,000. You will be taxed 3.8% of $40,000 (because $40,000 is less than $50,000, duh), or $1,520.
  • Your AGI is $0. The gain on the sale of your home is $1,000,000, which is $500,000 above the $500,000 exclusion. In this case, the new AGI is $500,000, which makes the excess equal to $250,000. You will be taxed 3.8% of $250,000, or $9,500.

To summarize, the Medicare tax will apply only to high income earners and only after the current primary home exemptions. And, keep in mind that the gain on your home is calculated by subtracting your cost basis from your sale price. The cost basis is not what you paid for it but the adjusted cost after taking into account the escrow, title, and other real estate fees you paid when you bought and sold, not to mention the cost of the new water heater you had installed in 1993.

It's quite possible I made a mistake here somewhere, so check my math carefully. There will be a test later.

 

A Few Take-Aways From That Time My Email Was Down (Random Musings)

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I could almost hear the mournful, whistling theme song – the one that plays in every Western movie right before the gunfight scene. I could almost see the tumbleweeds dancing playfully across the desolate badlands of my computer screen.

Life without email is a lonely existence.

For nearly twenty-four hours, we found ourselves without email. Twenty email boxes in all were affected. The first stage of the mourning process is panic, of course. I imagined the emails I had been missing. “I would like to sell my $4 bazillion home. If I don’t hear back from you in five minutes, I will be listing with someone else. And I will call you bad names on Yelp.”

Stage Two is where you become The Problem Solver. You spend two hours on hold with your mail server’s crack technical support team, a team whose only support is to provide you with an unending barrage of “support numbers” while your case is being “escalated,” during which time you are forced to listen to Pachalbel’s Cannon on an infinite loop until you are compelled to impale yourself on a two-hole punch, if only you still had one of those throwbacks to simpler times.

During the third stage of mourning, you (and “you” would be “me”) become very angry, at which point you start tweeting mean things about an unnamed mail host (Network Solutions), hoping to harness the power of social media to force some divine intervention. And you post mean things on Facebook, too, because you have a lot of free time on your hands.

Finally, comes acceptance. You accept that your husband is really tired of your whining and may actually make good on his threats to find “a replacement wife.” You accept that while you may in fact lose a couple of business opportunities, no one is going to die. And you remember that an unnamed mail host intent on ruining your life and livelihood (Network Solutions) can’t keep you down. You are better than that. You still have Internet.

A victim of circumstances, I spent a lot of time catching up on reading. Mostly, I read Facebook and Twitter – until my eyes glazed over and to the point where I now consider myself the world’s foremost expert on “trending topics.” Oh, and I also managed to avert my eyes from the little black box and get out to show a home or two. So, in the spirit of sharing, I now bring you:

A Few Take-Aways From That Time My Email Was Down

1.     “The effect that political signs in yards has on buyers’ evaluations of the neighborhood should not be under estimated.” This was tweeted by one of my friends and colleagues in Virginia. Cosign!!

You see, people have biases. They like people who are like them. Which is the same reason it is poor form to leave family photo galleries or religious artifacts on display when showing your home. And it is the reason all of those agents I see on Facebook espousing their political views are violating the first rule of business development: Don’t alienate half of your potential clients.

2. “We’re at the bottom, but it will be long and flat.” This was tweeted by my “BFF’s” at Zillow and is a quote from their chief economist, Stan Humphries. Actually, the concept is being tweeted by nearly everyone in the industry. And they are right.

Inventory is nearly non-existent in our market, and buyer demand is crazy-strong. Case in point: When I pulled myself away from my depths of email-less despair to show a new listing to client, one that was being held open (the listing, not the client), we thought we had mistakenly stumbled into an Apple store on Free iPhone Day.

3. “I’ve been stuck on a plane, and was too timid to pull an Alec Baldwin.” The point here is that my Twitter-prolific daughter is apparently flying somewhere. Good to know. If not for social media, I would have no clue where the girls are or what they are up to.

4. “If you are meeting someone for the first time, and you have no idea what they look like or what kind of car they drive, don’t make assumptions.”  That’s from me. At that same open house (see #2 above), I was meeting a new client for the first time. Did I mention that this open house was well attended? And let’s assume that I was meeting “Dave” at 1:00. So, at precisely 1:00, I stood in the driveway clutching my MLS printout and wearing my best, “happy to meet you” grin.

And as each car slowed in front of the home around 1:00, all seventy-two of them, I proceeded to wave them into the nearest parking spot, greet them at the driver’s side door, and enthusiastically pump their hand. “Hi, I’m Kris!” I said, seventy-two times. “Hi!” they replied, looking rather confused. “I’m William (or Suresh or Daniel or, well, just insert seventy-two names here that AREN’T Dave). When “Dave” did finally arrive (there were no parking spaces left), the home was full of people talking about some whack job out front who must be running for office or something.

5. “Welcome to Akin country. Webster Groves, Mo.” Ah! So that’s where she was going. My daughter-the-political-journalist is in Missouri. Again, good to know.

6. “How to See 20% More Listings, One Week Faster,” tweeted Refin. The link was to the Redfin Blog where they talked about a recent study they commissioned that found that (gasp!) the listing inventory on major national, third-party portals like Trulia and Zillow are fraught with errors, incomplete and lagging. I could have saved them the trouble of paying an outside consultant. 

I do have to give them kudos for the spin they put on the findings, however. “The study found that Redfin has 20% more agent-listing homes for sale, and gets new listings 7 – 9 days faster,” they wrote (emphasis theirs). Well, that is true. But, here is the other true part: The same holds true for all other broker, agent and MLS websites with a search-for-homes features – including OURS. It’s through the magic of a little thing called IDX (Internet Data Exchange), and Redfin doesn’t have a corner on the purest, most time-certain listing data; the entire brokerage community does. Just sayin’.

7.  And speaking of IPO’s (were we?), Realogy Corp. just had their own IPO. As reported by Inman News, Realogy, franchise giant behind brands including as Coldwell Banker, Century 21, and Better Homes and Gardens, “has said it will use proceeds from the IPO to pay down more than $7 billion in outstanding debt.”

Zillow, Trulia and now Realogy. I am starting to think that I should do one of those IPO thingies like all the cool kids. Sure, San Diego Castles Realty has no debt, but what the heck. Who couldn’t use a little cash infusion? Maybe I could buy myself a new toaster oven or something. I’ll have to chew on that one.

8. “All my dreams of never becoming First Horse are finally coming true,” wrote @RafalcaRomney. Trust me, I am not getting all political here. As we covered in #1 above, it would be foolish of me to tip my hand as to my own political leanings. It’s just that I find it hysterically funny that a fake Twitter account for a Presidential candidate’s horse has 8,897 followers, so I can’t help but “follow” him myself. (I find it equally funny that I have over 5,000 followers, but that is puzzle to be solved another time.) 

photo by: K W Reinsch

What are those appraisers thinking? An Election Day rerun.

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(Editor’s Note: If you are reading this, stop it right now and GO VOTE!)

From my inbox yesterday:

“Your site looks great, but I noticed that you've only had three blog posts since Wednesday, May 25, 2011. I'm sure you are just too busy to write blog posts every week!”

Why, yes. Lately, I have been a little busy. That’s not the point.

This was a fitting message on what was the eve of voting day – fitting, that is, because it is blatantly false. Why, just three weeks ago I wrote about… well, stuff. But, the point is, I have written about a lot of “stuff” since May 25, 2011.

Even though I knew in my heart as I read this little disciplinary note (a note, coincidentally, sent by a company who would love to blog for me for a small monthly fee), I found myself doubting myself. Much like the political ads we have been bombarded with of late are mostly absurd, if we are subjected to them often enough and for long enough, we start to question what we know to be true.

“Maybe that candidate does hate freedom and fuzzy kittens; maybe that other guy did knock off a liquor store in 1962.”

“Maybe I haven’t blogged since 2011.”

Fortunately, a few seconds of my own fact checking confirmed that our blog, while not exactly falling into the “breaking news” category lately, is alive and well. It was during this fact checking that I stumbled upon the following post worthy of a revisit. 

Appraisals. In this market of so many buyers and so few listings, in this market of multiple offers, fierce competition among would-be homebuyers, and appreciating prices, appraisals are once again becoming the bane of all folks who commit random acts of real estate for a living. Appraisals are also no picnic for sellers.

Your home is ultimately worth not what a buyer is willing to pay but what the appraiser says it is worth. I know, I know. Your house is special – way more special-er than the one that sold down the street last month. In this trip down memory lane, we’ll look at what bonus points an appraiser might award for each of those features of specialness.

This represents but one independent “poll,” of course. Your mileage may vary. The important thing to remember is that appraisers are like undecided voters. They are all different, and you can’t possible predict the voting outcome prior to Election Day. 

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When pricing your home to sell, you have two audiences to consider. First, of course, there is the potential buyer. But remember, unless that buyer is Warren Buffett or some dude who has been cashing in his aluminum cans at the recycling center for a very long time, chances are he is going to need a loan. And before that buyer can get loan approval, the lender is going to want a neutral third party to confirm the value of the home. Enter the appraiser.

"But it has to appraise!" we find ourselves hollering a lot lately, often to a bunch of non-believers seated at the kitchen table. You see, you may know that you spent $247, 850.98 on all of your stunning improvements. Heck, you have receipts! And I may know that your wood floors are not just any wood floors, but made of materials hand-crafted by indigenous peoples of the exotic rain forests of Malaysia… or Burbank.

Guess what?

The appraiser doesn't care. He doesn't care if you selected the higher-end granite or popped for the pull-out cabinet shelves. She doesn't care if your windows were installed by a certified Pella specialist or by Gus from your golf foursome who has a booth at the swap meet on weekends.

All of this got me thinking. How much value, exactly, will an appraiser place on a home's various and sundry, unique qualities? So, I embarked on a little research project. With the help of our awesome San Diego Castles agents who provided me with much of the necessary research materials, I compiled a sampling of eleven recent appraisals. These appraisals were commissioned for transactions in which we represented either the buyer or seller. The results? A lot of confusion, I'm afraid, but I'm guessing the results might surprise you.

First, know that the majority of the time, we never see the appraisal. The appraisal belongs to the buyer, so if we are representing the seller, we aren't privy to the actual, written report. And even when we are representing the buyer, the lender will simply tell us that the appraisal "came in at price," and we march along our merry way toward closing.

The fact is that appraisals almost always comes in "at price." Buyers are so smart. It seems that in almost every case, the buyer has offered to pay exactly what the appraiser ultimately concludes the home is "worth." Super impressive! But, here's what you need to know. The point of the appraisal is to assure the bank that their investment is solid and that there is no funny business going on. We all know that coming up short on appraised value means no loan, which leaves us all scurrying to renegotiate. In the bank's eyes, a higher appraised value makes them equally nervous.

Without further ado, here are the results of my compare-and-contrast take-home assignment. First the spreadsheet, and then I shall perform a little interpretive dance. Keep in mind that appraisals work like this: The home being appraised is the "subject" and the sale prices of all of the "comparables" are adjusted either up or down to reflect the varying features with the goal that, ultimately, the appraiser is comparing like fruits. (Note: For line items where no adjustment value is given, the properties were either considered to be equivalent or the appraiser didn't consider that particular feature relevant to value.)

Pool/spa

This one was a stand-out as being fairly consistent among appraisals. They will generally give you props to the tune of $15,000 to $20,000 for having one, and it doesn't matter if your pools is a simple rectangular concrete watering hole or something reminiscent of a scene from Blue Lagoon.

Barbecue

I have never seen an appraiser give credit for a built-in backyard barbecue. Never, that is, until my most recent appraisal. This time, we were awarded 10,000 bonus points. Practically speaking, don't expect the same treatment. This was an anomaly. And, it is worth mentioning, that we got this credit for a barbecue we didn't even have.

Bedroom/Bath

This one might be the biggest surprise of the bunch. Buyers, sellers and agents know that there is a world of difference between a three-bedroom and four-bedroom home — so much so that these properties attract different buyer pools altogether. However, appraisers only look at "room count." So, whether that extra room is a bedroom or bath (or half bath, because they round up!) makes no difference. With one exception, our appraisers considered the extra room worth between $1,500 and $5,000. The exception? One appraiser gave a $35,000 credit for having an extra bedroom. Like my barbecue, don't count on this.

Patio

Most of our appraisers didn't care. A patio is a patio, they concluded, so no credit was given. One appraiser did consider that having a patio or balcony versus none was worth $1,000. Another (our lover of the outdoor barbecue), gave a $10,000 credit simply because our patio was covered and the others were not. (Punch line: $10,000 is very close to the estimate we received from the termite company to replace the patio cover that was the victim of much wood rot.)

Location

This one is oh-so subjective, so any credits will be dependent on the appraiser you are assigned. One appraiser dinged a home by $20,000 for backing to a road but made no adjustment to the home that's side yard abutted a busy road and gave no concession for a cul-de-sac location. Another thought the cul-de-sac was worth $5,000. And our beach property? The appraiser made upward adjustments of between $50,000 to $100,000 the closer a property was to the big blue wet thing. Eight appraisers ignored location altogether.

Lot Size

I have always found this one slightly flawed. Usability, design, quality of landscaping and hardscaping, the fact that the rear neighbors' homes are slightly elevated giving you that charming "amphitheater" feel — those things are rarely considered. On the other hand, the lot size shown on your Assessor's record will get you between $1 and $6 per square foot in our study.

Home Size

We've already adjusted for room count, but here is our double-whammy. Square footage of the home will be adjusted. By how much? Beats me. Our appraisers applied values of between $35/square foot and $135/per square foot. This one is a turkey shoot at best.

Fireplace

$1,000 to $5,000, depending on… well, I'm not sure.

Parking

You will be awarded $4,000 to $5,000 for an extra garage stall. If you have a garage versus a parking space, the difference could be between $2,500 and $5,000.

Air Conditioning

Credits here were between $1,000 and $3,000, and while you might think it varied due to size of the home, it did not.

View

"How much is my view worth?" This is one we get all the time. The answer is that you will get some credit, but it won't be anywhere near the view premium you paid the builder when you bought that premium lot. First, we have our little beach pad. The beach is different. Here, our appraiser awarded price tiers of $50,000 for varying degrees of ocean view. Our barbecue enthusiast considered a view of Miramar Lake (the home was a first-tier, lake view home) worth $50,000, but gave our home no credit for having an open space view. With those two exceptions, "view" premiums ran between $10,000 and $20,000 depending on just how pleasant the particular appraiser considered the particular views.

Condition

Finally! This is where nearly every seller thinks they will get the standing O's. But, and I can't say this loudly enough, THERE ARE JUST THREE CATEGORIES OF CONDITION. They go by different names, but there are only three. You are either worse than, equal to, or better than the other homes in terms of upgrades in the eyes of the appraiser. Our credits were at least ballpark-consistent. Again, our one outlier was Sam the Cooking Man. He conceded a total swing of $60,000 between the homes in the poorest versus best condition. (In retrospect, he was quite generous on almost all fronts — and we still came up short on value.) As for the others, the pristine homes with the shiny new kitchens and remodeled baths were considered to carry only a $20,000 to $40,000 premium over their poorly maintained, under-improved counterparts.

There are other line items and considerations in the appraisal report, of course. "Year built" is a zinger and one for which, for the life of me, I can't decipher the formula. It appears to involve dreidels, Ouija boards, and a game of "Rock, Paper, Scissors." Those "extra rooms" are always fun. Our client who paid $50,000 for the fanciest California Room I have ever seen (complete with real Pella windows, cable, electrical, closets and ceiling fans) got a $5,000 credit and lost their buyer in the process.

Finally, there is a curious line item in the Uniform Residential Appraisal Report titled "Energy efficient items." I say curious, because I have never seen an appraiser take energy efficiency into account. Such was the case for Property 1 (remember the barbecue?). This home had a $50,000 energy system. The owner worked out of the home, and thus it was lit up like a runway every hour of every day. His heating and air conditioning systems worked non-stop, as he had a two-degree temperature span, and he heated his pool in December. Despite all of this, most months he sold energy back to the utility company. Appraiser's credit? Zip.

And what happens if your appraisal misses? You can appeal it, right? Of course! And we do. With the new appraisal rules, here is how the process works. We can't speak to the appraiser directly. He's neutral, remember? So, we prepare our thoughtful appeal and submit it to the lender who, in turn, will submit it to the appraiser. He will carefully consider our appeal, including all of the errors and oversights that you we respectfully pointed out. He will "duly note" those points that we have raised, and then he will give us a big, middle-finger wave.

The bottom line is that we can talk all day about what your home is worth to a buyer. We can talk about return on kitchen versus bath remodels and new roofs versus crown molding. But the reality is, your home is first worth what a buyer is willing to pay but ultimately, what an appraiser says you are worth.

 

 

 

 

Bank of America Short Sale Update – Let the Good Times Roll

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From the OMG files, Bank of America (BAC) recently sent a new advisory to agents who handle short sales. And, as if short sales weren’t already enough fun (and by “fun” I mean “Oh-please-make-it-stop-I-should-have-been-a-ballerina”), BAC is now cautioning agents and sellers involved in their short sale process not to get too excited about the approval letter or scheduled closing date. Here is a partial screen shot of the love letter I received:

 

Says BAC, “Bank of America services mortgage loans for hundreds of investors. As a part of normal servicing, investors may decide to release or transfer servicing from Bank of America to another company… Real estate professionals should advise homeowners that, similar to foreclosure, a servicing transfer is a risk that may occur at any time during the short sale process.”

So, what? Responsibility for the servicing of your loan gets transferred. It happens all the time. Except, if you are in the throes of short sale fun, an ill-timed servicing transfer could derail your otherwise imminent short sale – you know, “similar to foreclosure.” Whatever.

According to BAC, “If an offer has already been accepted on your short sale, a closing has been set and an approval letter issued, the new servicer will determine if the short sale will continue.” (Emphasis added.)

In other words, you’ve got nothing. Rinse and repeat.

Oh, and we are also to be advised that “it takes 30 days or more for the new servicer to access the loan.”

Good times.

 





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